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The Sinocism China Newsletter 10.08.15

"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

Today’s Links:

THE ESSENTIAL EIGHT

1.Navy to challenge Chinese claims in South China Sea-Navy Times The Navy is preparing to send a ship inside the 12-mile territorial limit China claims for its man-made island chain in the South China Sea, according to military officials. The action could take place within days but awaits final approval from the Obama administration, the officials told Navy Times. // looks like a bit of a coordinated leak campaign to get this news out…now the US will really look like a paper tiger if this does not happen. Sending in ships so soon after the summit a sign I think of how poorly it went, and will likely be used by Xi to back away from whatever his “no intention to militarize” statement meant. Hard to see how this ends well, but the only other option for the US is to concede, which will materially damage US credibility in Asia, be viewed by the PRC policymakers as further evidence that the US is in terminal decline and be an additional impetus for Beijing to push harder against the US in Asia. CSIS’ AMTI I believe first published pictures of the work to reclaimland features by dredging sand from the South China Sea in February of this year, but China’s efforts started late 2013/early 2014. There is no way the US government intelligence apparatus did not know about this many months before the public did, which makes you wonder why it has taken nearly two years, and a near fait accompli by Beijing, for a response beyond jawboning…

Related:US warships to challenge Chinese claims in South China Sea – FT.com A senior US official told the Financial Times that the ships would sail inside the 12-nautical mile zones that China claims as territory around some of the islands it has constructed in the Spratly chain. The official, who did not want to be named, said the manoeuvres were expected to start in the next two weeks.

Related:South China Sea: US and China at odds The most powerful navy officer on earth, US Pacific Fleet Commander Admiral Scott Swift, has fired a broadside at China and other regional nations who are flouting international law in the South China Sea. Speaking to a high-powered audience that included senior navy officers from more than a dozen countries at the Pacific 2015 expo in Sydney on Tuesday, Admiral Swift warned that “friction points” at sea and the “might makes right” approach of some countries (China) could lead to all out conflict in one of the world’s most dangerous flashpoints.

Related:Randy Forbes: U.S. Needs Ways to Talk About China Strategically – USNI News Similarly, the Chinese have taken to identifying coral reefs where they have been building airstrips and landing spots as islands and claiming them as their territory. Likewise, they are disputing passage of ships through waters near those reefs as violating their economic zone. He noted that the Chinese coast guard is “only 60 ships short of what we have in our Navy” and is used to influence political events in the region. Forbes said that the Chinese used “controlled friction” to get their way.

2.Stephen Colbert’s Pander Express – YouTube All the big action movies know that to really make your bank, you have to get your film into the Chinese market. So Stephen’s taking a page from their playbook. // painfully brilliant dismemberment of Hollywood’s craven global censorship to appease PRC censors. Just as movies on planes post a disclaimer that “this content has been modified to…”, perhaps Hollywood should be required to declare that “this content has been modified to appease Beijing” in front of any films whose content was altered at any stage in the creative process to ensure China’s approval. I understand the business imperative, but viewers have a right to know…

Related:Accused of Hiding Money, China Agrees to New Rules in Secret Hollywood Summit – Hollywood Reporter When Xi Jinping made his first major visit to the U.S. in February 2012, as vp of China, the trip culminated in a landmark agreement that opened the Chinese market to more Hollywood-made films (34 titles a year, up from 20) and boosted U.S. distributors’ share of box-office revenue in the country. When Xi again arrived stateside Sept. 22, this time as China’s president, sources tell THR the MPAA worked to seal a follow-up agreement with China Film Group, the country’s powerful state-backed studio. The negotiations were shrouded in secrecy, but a Beijing-based source with knowledge of the discussions says China made two key concessions: an agreement to allow international firms to audit ticket sales at China’s rapidly expanding box office, and a plan to increase significantly the number of foreign films allowed into China on what’s known as a flat-fee basis.

3.Graft-buster named as head of China’s spy agency as anti-corruption watchdog extends its power | South China Morning Post A former senior official at China’s top graft-busting agency has been given the highest Communist Party job in state security, mainland media confirmed yesterday, signalling the agency is expanding its power. Hebei -based Yanzhao Metropolis Daily confirmed the move on Thursday when it reported that Chen Wenqing , 55, a former deputy chief of the Central Commission for Discipline Inspection, toured the Xibaipo Memorial Museum on September 22 in his capacity as party chief of the Ministry of State Security. He remains a member of the commission.// my understanding is that the MSS knew lots of the details of elite corruption before XI and some were quite disgusted. A cleaned up MSS, working closely with the CCDI, could make things very interesting…

4.China says must make $315 billion – $630 billion green investments per year | Reuters China must make green investments of between 2 trillion and 4 trillion yuan ($315-630 billion) per year over the next five years, but the government can only cover 15 percent of that, China’s central bank deputy governor, Yi Gang, said on Thursday. “Most of the finance has to come from the private sector, so we have to provide a positive incentive mechanism,” Yi said on the sidelines of International Monetary Fund meetings in Lima.

5.Smoking set to kill one in three young men in China, study finds | Reuters One in three of all the young men in China will eventually be killed by tobacco unless a substantial proportion of them succeed in quitting smoking, researchers said on Friday. “Without rapid, committed, and widespread action to reduce smoking levels, China will face enormous numbers of premature deaths,” said Liming Li, a professor at the Academy of Medical Sciences in Beijing who co-led a large analysis of the issue.

6.China’s ‘citizen scores’ system isn’t so Orwellian…yet-TechinAsia The ACLU seems to have been confused about a few things, but here’s the key one: Alibaba’s Sesame Credit scoring system, Tencent’s credit scoring system, and the mandatory government one (which isn’t mandatory until 2020) are not the same things. They are three different things that many articles in the Western press are treating as if they were the same.

7.Col. Liu Mingfu on the U.S. and China as Rivals – The New York Times On American nongovernmental organizations: American NGOs have turned Hong Kong into a mess. A large number of these NGOs have been planning to destabilize Hong Kong in an attempt to put more pressure on mainland China. NGOs are in fact an approach by the Americans to overthrow the Chinese government. They have dispatched more intelligence agents to Hong Kong than to Beijing these days and frequently organize subversive activities to teach the people there how to work against the Hong Kong government and the Communist Party

8.Some notes from China — Getting to worksmart postby a former McKinsey consultant in China // What gave me the most hope for China’s long-term future was the combination of this innovation with the increasing depth and diffusion of real entrepreneurialism. Sitting among almost a dozen late-twenties to early-thirties middle-class Chinese friends, most ex-colleagues, I realized that starting a firm or joining a start-up was the occupation of a majority of them. It was even normative—the couple of people who hadn’t left their comfortable, large-company jobs were a little (some of them more than a little) embarrassed about it. ..This phenomenon, of ambitious entrepreneurship becoming socially normative, is rare—to my knowledge, it only exists in the US. It is backed by a rich vein of talent coming through the universities. A few years ago the generations born in the 80s and 90s were considered a tinderbox—the rich kids were a disaster, the migrant kids thought to be resentful. It may be the middle class kids are the real story, being highly educated, ambitiously entrepreneurial, and (very) large in number. A Shanghainese friend in financial services who was very pessimistic about her country three years ago is now turning optimistic, largely on the basis of what she is starting to see in that cohort. // and likely a very nationalistic cohort

BUSINESS, ECONOMY AND TRADE

Once the Biggest Buyer, China Starts Dumping U.S. Government Debt – WSJ Sales by China, Russia, Brazil and Taiwan are the latest sign of an emerging-markets slowdown that is threatening to spill over into the U.S. economy. Previously, all four were large purchasers of U.S. debt. While central banks have been selling, a large swath of other buyers has stepped in, including U.S. and foreign firms. That buying, driven in large part by worries about the world’s economic outlook, has helped keep bond yields at low levels from a historical standpoint…Internal estimates at the PBOC show that it spent between $120 billion and $130 billion in August alone in bolstering the yuan’s value, according to people close to the central bank.

Alibaba Letter Seeks to Soothe Shareholders – WSJ In a letter to shareholders set to be published on Thursday, Jack Ma, the e-commerce giant’s executive chairman, said the world was overreacting to China’s economic slowdown and that he believed it wouldn’t hurt consumption. The letter, reviewed by The Wall Street Journal ahead of its release Thursday, is part of an online interactive report with videos and charts that seeks to better explain the Chinese market and the company’s strategy to overseas investors. “I do not agree with the notion that consumption will decline as economic growth slows,” Mr. Ma wrote

[朝闻天下]盘点国庆黄金周·钱去哪了新闻频道央视网(cctv.com)CCTV News on UnionPay using “big data” to analyze how money is spent during Golden Week…imagine the data Tencent and Alibaba also have, someone must be able to watch near real-time consumption patterns

China launch of renminbi payments system reflects Swift spying concerns – FT.com China “wants to facilitate cross-border international business transactions, but you also have to wonder if there’s another angle here,” said Gerard Comizio, chair of global banking practice at law firm Paul Hastings in Washington. “They’re now relying on a payments system that is highly susceptible to being accessed by intelligence agencies from the US.”…“In the future CIPS will move in the direction of using its own dedicated [communications] line. At that point it can totally replace Swift,” said a person with knowledge of the PBoC’s plans for CIPS.

China’s top auditor says US$45b of construction projects face delays | South China Morning Post Major Chinese construction projects worth about 286.9 billion yuan (US$45.17 billion) are facing delays because of problems such as the slow distribution of funds by local governments, the country’s top auditor said on Thursday. Its comments are likely to fan concerns over the effectiveness of China’s renewed effort to pump cash into infrastructure to shore up its slowing economy, as it suggests that such investment is taking longer to ripple through.

Taikang Executive ‘Picked to Set up Belt and Road Fund’-Caixin A senior executive at one of China’s leading insurers has been appointed head of an interim body that is to launch a central government-backed fund to finance projects linked to the “belt and road” initiative. Duan Shiguo, a vice executive president at Taikang Life Insurance Ltd. Co., was selected by the China Insurance Regulatory Commission (CIRC) to help launch the China Insurance Investment Fund, a source who was recently briefed about the appointment said.

Alcoa cuts China outlook – Business Insider what we see here with Alcoa is the latest signal that heavy industry in China is slowing down while consumer spending — which would really only directly impact Alcoa’s packaging segment — remains solid.

Uber invests $1B in China, sets up local subsidiary-TechinAsia Uber is investing nearly US$1 billion (RMB 6.3 billion) into China as it battles homegrown arch-rival Didi Kuaidi, reports the Shanghai Daily. In addition to that, Uber has set up a local subsidiary registered in the Shanghai Free Trade Zone. The spin-off company is listed as having RMB 2.1 billion (US$331 million) in registered capital.

FOREIGN AND DEFENSE AFFAIRS

Indonesia Mulls Drones in Response to China’s Maritime Flexing – Bloomberg Business Indonesia is considering using drones and submarines to strengthen its grip over the gas-rich waters around the Natuna Islands in response to China’s growing military presence in the South China Sea. These comments by Indonesia’s security chief Luhut Panjaitan in an opinion piece Wednesday in the Kompas newspaper represent some of the most direct yet by the nation over China’s claims in the water. They highlight unease in the government even as it maintains it is not a party to regional disputes over the waters.

China spurs Narendra Modi’s pivot to Washington – FT.com Mr Modi’s pivot to Washington is part of the same picture. India will always be ambivalent about the US. Part of it still hankers for the “strategic autonomy” that came with leadership of the nonaligned movement during the cold war. Visceral pride says India can never be a junior partner in a US-led alliance system. The historically close relationship with Russia also matters; the habit of close collaboration with Moscow has outlasted the collapse of communism. Yet the world’s largest democracy needs the investment and defence equipment that only the world’s most advanced democracy can offer. And the US is the essential guarantor of the effort to check Chinese power.

Chinese Hypersonic Engine Wins Award, Reshapes Speed Race? | Popular Science Scramjet engines mix together air and liquid fuel at supersonic speeds, to result in the rapid combustion that propels aircraft and missiles at hypersonic speeds over Mach 5. In September 2015, Professor Wang received an award from the Chinese Society for Aeronautics and Astronautics (CSAA) for the successful development of China’s first scramjet engine over the past decade. In fact, Professor Wang took the top billing at the 2nd China Aeronautical Science and Technology Conference (CASTC2015) Feng Ru Aviaion Science &Technology Elite Awards (Feng Ru was an early 20th century Chinese aviation pioneer). CSAA took pains to mention that the kerosene powered scramjet engine has successfully conducted flight tests, which makes China the second nation in the world, after the American X-43 and X-51 test vehicles, to develop a working scramjet engine for sustained atmospheric hypersonic flight.

China’s armed forces to recruit more civilian personnel – Xinhua The spouses and offspring of military personnel who have fallen in the line of duty, and the spouses of those still in service will be eligible to apply to certain posts. More positions will be made available for candidates with relevant work experience. It is hoped that the drive will improve recruitment in remote areas and unpopular positions.

TECH AND MEDIA

Why Biggest China Internet Deal Didn’t Need Two Sets of Bankers – Bloomberg Business Such dual mandates leave less room for the bulge-bracket investment banks in an industry populated with the nation’s most active acquirers. China Renaissance worked on more Internet transactions in the country than any other adviser since the start of 2013, surpassing far larger Western competitors like Goldman Sachs Group Inc. and Morgan Stanley, data compiled by Bloomberg show.//Bao Fan is killing it, one of hardest working people I have ever met

SOCIETY, ART, SPORTS, CULTURE AND HISTORY

China’s First Soap Opera – A National Craze – What’s on Weibo Yearnings covers a time span from the Cultural Revolution to the time of the economic reforms in the 1990s, and tells the story of two Beijing families: the Liu’s and the Wang’s. With the Wang’s being sophisticated intellectuals, and the Liu’s being traditional workers, the families are from completely different backgrounds but are brought together because of the unlikely marriage of the Liu daughter (Huifang) to the Wang son (Husheng).

ENERGY, ENVIRONMENT, SCIENCE AND HEALTH

China raises solar installation target for 2015 | Reuters China has raised its solar power installation target for 2015 by 30 percent from its previous goal, state media reported, potentially adding to overcapacity as insufficient grid capacity remains a hurdle for the new plants to deliver power…The new stations will be added mostly in Inner Mongolia and Hebei in the north and Xinjiang in the west, the report said.